Scarborough Shoal, a mecca for fishermen, is claimed by both countries, and the fight over it and other territory in the South China Sea threatens to entangle the U.S.

Luz Farones Macario, the wife of a fisherman, now sells meat at the market… (Barbara Demick /Los Angeles…)

MASINLOC, Philippines — The fishermen were sailing the azure waters off the Philippine coast when Richard Caneda saw the morning sunlight glinting off a vessel "bigger than the biggest ship in the Philippine navy."

Caneda could see a red Chinese flag. The words "Chinese Maritime Surveillance" were written on the ship's side.

The ship came close enough that Caneda could see crew members on deck making hand gestures as though to shoo away a fly. Caneda, who had moved from the fishing boat to a tiny skiff to haul in nets left out overnight, soon saw a large gun mounted on the ship's deck pivoting directly toward him. A helicopter whirred overhead.

The fishermen fled, leaving their nets and catch behind.

"We were scared. We were angry. We were frustrated. That is our livelihood," Caneda, 34, a now-unemployed father of three who lives in a shantytown in Masinloc, said of the November encounter.

It happened near the reef known as Scarborough Shoal, 130 miles off the coast of the Philippines' largest island, Luzon, and barely 200 miles from Manila, the Philippine capital. Claimed by both China and the Philippines, the mostly underwater reef has come to represent the dangers of Chinese expansionism.

"Scarborough today — tomorrow the world," read banners at an anti-China demonstration last year in Manila.

In its quest to become a maritime power and to tap potential undersea oil and gas reserves, China is asserting sovereignty over various islands, rocks and reefs dangerously close to the shores of Japan, South Korea, Malaysia, Brunei, Vietnam, Indonesia and the Philippines.

Beijing and Taipei, Taiwan, condemned the Philippines on Friday for the shooting death of an unarmed 65-year-old Taiwanese fisherman in the disputed waters of the South China Sea. Philippine authorities said a coast guard ship fired on the Taiwanese vessel a day earlier in an area to the north of Luzon, but only in an attempt to disable the engine to prevent being rammed.

On Wednesday, the Philippines issued an official apology in a response to a midnight deadline set by Taiwan, which had threatened economic retaliation.

Along with Japan's Senkaku islands (known as Diaoyu to the Chinese), the Scarborough Shoal is the area's most hotly contested territory, the scene of dozens of too-close calls during the last year.

Despite pledges of neutrality from Washington, the dispute could easily entangle the United States, resurrecting Cold War alliances and putting to the test the Obama administration's so-called pivot toward Asia.

For most of the 20th century, the U.S. Navy had its largest overseas base at nearby Subic Bay in the Philippines, and the Navy used to conduct firing exercises at Scarborough Shoal. Feeling that the Americans had worn out their welcome, Manila asked the Navy to leave in 1992. But last year, a few U.S. vessels were readmitted on a rotating basis, and Filipinos increasingly are expressing regret about the American departure.

"If the Americans were still at Subic Bay, the Chinese wouldn't dare do this to us," Caneda said.

In January, the Philippines asked a United Nations tribunal to determine the status of the reef. But the process could take years, and China has indicated it will not abide by the decision.

In the meantime, the Philippines finds itself outgunned, outmaneuvered and outspent. The Chinese have run a rope across the mouth of a lagoon inside the triangular-shaped shoal, where Filipinos have fished for generations, and in recent weeks have declared a 15-mile fishing ban around the reef.

The dispute has devastated the fragile economy of the fishing communities in coastal Luzon. The shoal used to attract so many fishing boats that at night with their lights shining, it looked like an illuminated city at sea.

Fishermen say the shoal was where they went to get the biggest and best fish: Spanish mackerel, Pacific cod, tuna and lapu lapu, a giant grouper. A 25-man ship could bring back $17,000 worth of fish in a single trip.

"The income from fishing is cut in half," said Julius Sumaling, a fishing boat captain who says it's not worth the gas anymore to go out with his ship, the San Pedro, now docked south of Masinloc, a town of 51,000 on the coast.

Joseph Morate, who sells squid at the main market in Masinloc, said he took his 15-year-old daughter out of school because he could no longer afford the $4 a day in transportation costs and needed her to baby-sit younger children.

"All I have to sell is squid because the Chinese are chasing us away from the quality fish," Morate said.

At the main market, many of the white tile tables where fish used to be displayed are now mostly empty or used by vendors selling meat.